Honda Asks Nissan About Acquiring Renault’s Stake
Honda Motor has asked Nissan Motor whether it would be able to acquire Renault’s shareholding, according to a Kyodo News report, as the two Japanese automakers prepare to combine in an effort to gain scale in an increasingly competitive car market.
Background
French auto manufacturer Renault holds a 35.7 per cent interest in Nissan, according to data compiled by Bloomberg, which is worth around 557 billion yen (S$4.9 billion).
Concerns
Honda is concerned that Nissan could fall under an undesirable foreign influence should Renault’s stake be snapped up by a third party while negotiations to absorb Nissan are underway, Kyodo said on Thursday (Jan 16), citing people familiar with the matter it did not identify.
Negotiations
Representatives for Honda and Nissan declined to comment. Nissan and Renault have an alliance dating back to 1999 that Mitsubishi Motors joined in 2016.
Combination Plans
Honda and Nissan kicked off negotiations late last year to combine in a move that would effectively split Japan’s car market in two as the global industry trends towards greater consolidation to compete with electric-vehicle makers led by Tesla in the US and BYD in China.
Rumors
Leading up to that announcement in December, rumors circulated that Hon Hai Precision Industry, the iPhone maker known as Foxconn, was interested in a partial or complete takeover of Nissan to utilise its manufacturing capacity and bolster its own foray into EVs.
Government Concerns
Seeing one of its automakers fall into Taiwanese hands would have been unpalatable to the Japanese government. Honda and Nissan have said they plan to announce a framework for their deal by the end of this month and aim to list a separate holding company that would house the two businesses by August 2026.
Financial Concerns
Whether Nissan would have the funds to buy out Renault’s stake, however, is questionable. Nissan’s market value has slumped to about 1.56 trillion yen, while its cash and cash equivalents were around 1.52 trillion yen as of Dec 31.
Nissan is also struggling financially, which is one reason why a tie-up with Honda is appealing. In November, Nissan said it would dismiss 9,000 workers and cut a fifth of its manufacturing capacity after net income plummeted 94 per cent in the first half of its fiscal year.
Nissan now sees its operating income plunging to just 150 billion yen in the year ending in March, down 70 per cent from its previous forecast. Management also lowered their revenue outlook by more than 9 per cent, meaning they now expect virtually no growth for the year.
Conclusion
Honda’s request to Nissan to acquire Renault’s stake highlights the concerns surrounding foreign influence in the Japanese automotive industry. The potential combination of Honda and Nissan aims to create a more competitive player in the market, but the financial struggles of Nissan pose a significant challenge.
FAQs
Q: Why is Honda concerned about Nissan falling under foreign influence?
A: Honda is concerned that Nissan could fall under an undesirable foreign influence should Renault’s stake be snapped up by a third party while negotiations to absorb Nissan are underway.
Q: What is the current market value of Nissan?
A: Nissan’s market value has slumped to about 1.56 trillion yen.
Q: Is Nissan financially struggling?
A: Yes, Nissan is struggling financially, with its operating income expected to plunge to just 150 billion yen in the year ending in March.
